Summary

That's it from us for today. Thanks for all the comments. Here is a summary:

•Ed Miliband has said he will break up the banks if Labour is elected in 2015, creating substantial new ones and forcing existing banks to sell branches, to improve lending to small businesses and service to customers. He told small and medium-sized businesses: “Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you.” David Cameron said the UK needed "a whole economic plan" instead, something the prime minister said the government was providing.

•John Cridland, the CBI director general, said he did not support the plan. “We've got too many proposals from politicians for structural change [for the banks],” he said. “Yes, let's have more competition on the high street. But a fixed number of bank branches per bank would lead to less consumer choice and service.” Chuka Umunna, the shadow business secretary, said that Cridland was wrong to think that Labour was proposing an arbitrary cap on banks' market share. Other business groups also attacked the plans.

•Umunna said Mark Carney, the Bank of England governor who this week spoke out against a cap on banks' market share, should not be getting involved in political issues. Miliband said Carney had not seen his speech before making his comments. The Labour leader said he agreed with the Bank of England governor that a market share cap on its own was not satisfactory.

•Umunna conceded that Labour's announcement could lead to a short-term fall in the share price of state owned banks, but he said that the policy made sense in the long term. Asked about this, Miliband said he was suggesting bank branches were sold, not given away, and that failing to reform the banks posed a bigger threat.

•Miliband said people in Britain had a "deep sense that there are some important things in this country that need to change".

What we really need is a whole economic plan, one that builds the roads and railways, that helps the small businesses, that creates the jobs, cuts people's taxes. That's what this government's delivering, and that's what the country needs.

Ed Balls has called speculation over his future in the shadow cabinet "tittle tattle" and has said he has a "very good relationship" with Ed Miliband, in whom he has "complete confidence".

He told BBC Radio 4:

I have a very good relationship with Ed Miliband. We have discussed this speech in detail for a number of weeks and the speech I'm making as part of this series next Saturday.

These things tend to be unsourced comments supposedly made to a journalist and if you are a grown up in politics then you don't take that kind of tittle tattle seriously at all.

I have complete confidence in Ed Miliband as leader of the Labour party and I'm Ed Miliband's shadow chancellor.

I'm the person who is going to make sure we have sound public finances but also have fairness in our Labour market, fairness in our tax system, preserve our National Health Service and have competition in banking in our economy to tackle the cost of living crisis and every day I'm going to work hard to do my job for the benefit, not of the Labour party, but for the British people and I'm going to work closely with Ed Miliband in the next year, as I have for the last three years, to make sure that we win the next election because that's the most important thing for me.

Balls did not attend Miliband's speech because he was attending the Franco-British Colloque, a "high-level networking group", according to the Press Association.

Anthony Browne, the chief executive of the British Bankers' Association, has attacked Miliband's plans, saying:

We do not believe that these proposals will make it easier for small businesses to get a loan. Capping the number of customers that the biggest banks are allowed to compete for will undermine the service that people receive. Banks who are approaching their market cap would be stripped of incentives to invest and improve their services as they would be barred from taking on new customers.

John Allan, the national chairman of the Federation of Small Businesses, called the plans "drastic":

There is a clear consensus the banking sector is far too concentrated and more competition and choice needs to be introduced. This is vital for small firms to get the access to finance they need to grow and create jobs.

In our view, that will be achieved by encouraging further entrants into the market through regulatory reform, improving the way the market functions - for example, reforming the current payment system controlled by the big banks - and stimulating a vibrant non-bank market such as peer-to-peer lending. These issues need to be addressed and reforms speeded up before drastic action such as stipulating market share caps are put in place.

The chief executive of manufacturers' organisation the EEF, Terry Scuoler, was cautious:

Ed Miliband has set out some good ambitions for what a more competitive banking landscape should be aiming to deliver, such as lower costs, better service and more new entrants, or challenger banks.

We have long argued that more diversity, choice and competition in the banking system and beyond is needed to support business and wider growth and investment in the real economy.

The best way to deliver this is to systematically reduce the barriers to new banks entering the market and encourage more churn and dynamism in the business and personal current account markets. That said, how this is achieved will need much careful consideration.

Say what you like about Osborne and Cameron, but through support for issues such as gay marriage, and a minimum wage rise, they have occasionally demonstrated a willingness to adopt stances that are ideologically counterintuitive and challenging to their own party and supporters. It’s hard to think of a single occasion since he was elected leader when Miliband has been prepared to show similar boldness.

A reckoning is indeed coming. But not, I suspect, the one Mr Miliband is hoping for.

As with so many of his economic plans, evidence of Varieties of Capitalism thinking is evident here. In the “co-ordinated market economy” model onto which Labour aspires to shift Britain, patient capital and financially stable SMEs (both central themes of Mr Miliband’s annonucement) are crucial parts of a web of mutually-dependent institutional arrangements. They complement the other ones: vocational training, active labour market policies, regulation of takeovers and consultative workplace practices. Expect more policies along these lines: institutional changes designed to produce both a lower cost-of-living and a steadier, more long-termist ordo-capitalism. Think Teddy Roosevelt meets Ludwig Erhard.

Quite whether the [Competition and Markets Authority] policy has the same resonance as the energy one—and whether commentators notice the shift to supply-side policy—remains to be seen. Certainly, the politics of binding the interests of earners and employers (small businesses are responsible for 60% of all private-sector jobs) seems smart. If the announcement flies, Mr Osborne may look like a man arriving at the scene of a party that has already moved on.

A different mode of increased competition in banking may be via new technology. PayPal now handles payments equivalent to half the volume of the global giant Citi. And Zopa, a new peer to peer network, has already brought together lenders and borrowers in a volume equivalent to a top ten building society. The uncertainty for these new entrants is how they will be treated by the regulator as they increase in size.The history of retail banking suggests that in time the current big players will incorporate many of the innovations. That will spread the benefits of the new developments but diminish competition again. In the end the big question may be whether we want strong banks (which by definition have a large market share) ring-fenced from their investment arms (already planned) or if we value competition more and hence are willing to take some risks and perhaps allow some regulatory freedom to new entrants.These are the issues that Labour will have to think further about and which today's speech offered no view on.

Despite huge public anger, banking reform is unlikely to set the world on fire, but it does provide a serious through line about economic reforms and tackling vested interests. According to Labour sources, today’s speech has opened up the way for more discussion over regional banking and diversification in the nature of banks being set up. The speech is also more than likely to form the basis from which big public policy will come; being the foundation for a discussion about the kind of economy a future Labour government will help create. Today was a big speech for Miliband and the party, but only the start of what will prove to be a very big year.

Chuka Umunna, the shadow business secretary, said this morning that Labour's policy could lead to a short-term fall in the share price of state owned banks - "it's probably happening as we speak now", he said, despite the fact the stock market was not open when he was speaking. Nick Fletcher examines whether or not that has been happening today.

Shares in Royal Bank of Scotland and Lloyds Banking Group have fallen back after Miliband's speech and the comments from Chuka Umunna that Labour's plans could affect the value of the state-owned banks.RBS is currently down 6.5p at 365p, a 1.7% decline, while Lloyds is just over 1% lower at 83p.

The falls increased marginally during the course of Miliband's speech, but with much of the news already reported, there little real surprise for investors.

Duncan Exley of the Equality Trust, which campaigns against inequality, said "we need to go beyond fixing broken markets, tackling vested interests and 'looking out for the consumer'":

More and more people are working every hour under the sun just to stay still. Ed Miliband is right to point out that the outdated concept of wealth trickling down from the top has left the vast majority struggling, with the richest reaping the benefits of others hard work.

The growth in economic inequality over the past 30 years has left us with a low-skilled, low-pay economy, with stagnating living standards for all but the wealthiest. Politicians are finally beginning to recognise voter disquiet at the UK's huge levels of inequality, but we need to go beyond fixing broken markets, tackling vested interests and 'looking out for the consumer'.

We need to look at policies which directly and explicitly reduce economic inequality if we want to improve livings standards, tackle the cost of living crisis and build a strong and sustainable economy that benefits all, not just those at the very top.

Mark Littlewood of the free-market thinktank the Institute of Economic Affairs has called Miliband's proposals "very unhelpful". He said:

If our banking sector is to return to good health, increased certainty in the rules and regulations affecting banks is crucial. This sort of headline-grabbing, political intervention by Ed Miliband is very unhelpful.We shouldn’t be preventing the best performing firms from expanding. Instead, we need to lower the barriers to entry to make it easier for new providers to compete in the banking market.Big banks might be expected to offer fewer good deals to customers as they approached their maximum threshold, which will in turn reduce the incentive for smaller providers to offer innovative and attractive new deals. High street lenders may also start to close down their least used branches, restricting choice and access for ordinary people.

Summary

This is Paul Owen. At one point towards the end of Miliband’s Q&A session he said he’d been “talking about these issues for two years”, and at times this week it has felt like it; this was a speech that had been briefed and pre-briefed until when the Labour leader finally delivered it there was almost nothing genuinely new to report. But here is a quick summary:

•Ed Miliband has said he will break up the banks if Labour is elected in 2015, creating substantial new ones and forcing existing banks to sell branches, to improve lending to small businesses and service to customers. He told small and medium-sized businesses: “Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you.”

•John Cridland, the CBI director general, said he did not support the plan. “We've got too many proposals from politicians for structural change [for the banks],” he said. “Yes, let's have more competition on the high street. But a fixed number of bank branches per bank would lead to less consumer choice and service.” Chuka Umunna, the shadow business secretary, said that Cridland was wrong to think that Labour was proposing an arbitrary cap on banks' market share.

•Umunna said Mark Carney, the Bank of England governor who this week spoke out against a cap on banks' market share, should not be getting involved in political issues. Miliband said Carney had not seen his speech before making his comments. The Labour leader said he agreed with the Bank of England governor that a market share cap on its own was not satisfactory.

•Umunna conceded that Labour's announcement could lead to a short-term fall in the share price of state owned banks, but he said that the policy made sense in the long term. Asked about this, Miliband said he was suggesting bank branches were sold, not given away, and that failing to reform the banks posed a bigger threat.

•Miliband said people in Britain had a "deep sense that there are some important things in this country that need to change".

Here is some Tory reaction to the speech from Sajid Javid, the financial Secretary to the Treasury, said:

Britain’s hardworking people have been made poorer by the worst recession in a century – the Great Recession caused by the Labour government that Ed Miliband was at the heart of. So Ed Miliband is complaining that his own mess isn’t being cleaned up fast enough.

This government is fixing the banking system to make it safer. But the only way to ensure a more financially secure future for people who work hard and for their families is to continue working through David Cameron’s long-term economic plan – reducing the deficit, creating jobs, cutting taxes, giving young people the skills they need to get on and fixing the welfare system so that it pays to work.

But Ed Miliband is all over the place. He failed to set out a credible economic plan for the future. And already he’s abandoning yet another of his slogans designed to catch short-term headlines. Instead, all he offers is more of the same old Labour policy that got us into a mess in the first place - more spending, more borrowing and more taxes. That would mean a less secure future for hardworking people and their children.

The Green party has called Miliband's proposals for breaking up the banks "feeble". Finance spokeswoman Molly Scott Cato said her party was calling for "a separation between essential day-to-day banking activities relating to households and businesses and banking activities relating to financial markets which are inherently more unstable". She added:

It is disappointing to see Labour taking such a feeble line. The banking catastrophe is not an example of a failing market that can be saved by a little more competition. Nothing short of determined political action to separate retail and commercial banking and the introduction of a test of social usefulness for financial products can protect society from another banking crisis and ensure that this most vital sector works for the common good.

Q: [From a Labour member and an ex-civil servant] Can you reconcile long-term political changes with the short-term demands of politics?

Miliband says clear leadership is the best solution to this.

If people have a clear sense of what a department is about, civil servants will respond. That was his experience in government.

Sometimes governments get in and turns things over for the sake of it, he accepts.

Q: [From the Social Economy Alliance] Someone told us we might do better with the Conservatives, because they have to be seen to be socially responsible, while you have to be seen to be economically responsible. What would you say to that?

Miliband says he has been talking about these issues for more than two years. He mentions his 2011 predators/producers speech. Many businesses are leading this agenda. It is not a Labour agenda. It is the country's agenda.

Many people in business want to create social value for the country. A crude characterisation, suggesting they are only interested in profit, is wrong.

Q: [From the FT's George Parker] Do you accept your plans may lower the value of the taxpayer's stake in banks?

Miliband says he is not saying bank branches must be given away. They would be sold.

Second, the biggest threat would be posed by reform not happening.

Q: What would you do about bank bonuses?

Miliband says the bonus cap is right.

The government should have legislated for it domestically.

Conservatives who criticise it say it is wrong for people in banks not to be able to have bonuses worth 200% of salary. So they think it wrong for a person earning £1m not to be able to get a bonus worth more than £2m. That is not right, he says.

He says he wants to say a nice thing about the banks. There are people leading them now who accept that there must be major change.

Part of the change that is needed is a "big, big change in the bonus culture".

Q: [From a woman who says she is from a Francophone background] I was able to learn English when I came to Britain. But people from my background can't now. And I'm the mother of a disabled child. What will you do for disabled children?

Miliband says it is "incredibly important" to give learning English the priority it deserves.

In the past some money spent on translation might have been better spent on teaching English.

On disabilities, he says the vulnerable in this country feel tossed aside.

As a society, are we showing the compassion that we should to the vulnerable?

This point is essential to the character of who were are as a country.

Miliband is now talking about the cost of living crisis. He is using some of the passage released overnight.

(He's in the middle of the room, turning to face different sections of the audience as he goes along. Memorising a speech may seem like a gimmick, but in the room it's remarkably effective. It allows Miliband to make direct eye contact with his audience. His conviction is coming across.)

Ed Miliband's speech

It is about those families who work all the hours that God sends and don’t feel they get anything back.

It is about the people who go to bed anxious about how they’re going to pay their bills.

It is about the parents who turn to each other each night and ask what life their sons and daughters are going to have in the future.

It is about those just starting out who can’t imagine they will ever afford a home of their own.

It is about the most vulnerable in our country who feel they are just being tossed aside.

And it is about all those who are doing OK but still feel Britain should be doing a lot better.

(He is speaking without notes, but Labour HQ have sent out a text of the speech that he has memorised. The quotes I'm using come from that. In some cases what Miliband said may have been very slightly different, but I am not using any passages that were not substantially the same as what he said.)

There must be about 400 people in the room. It looks like a square-shaped lecture theatre. The audience seem to be a mixture of students and Labour party types. Chuka Umunna, the shadow business secretary, is here (but not Ed Balls). We're still waiting for Ed Miliband to come in.

Miliband's speech - extracts and overnight briefing

Labour sent out a five-page briefing note about the speech overnight. It contained lots of extracts from the speech. Here are the key ones. (The news line summaries are in my words, not the party's.)

• Miliband will say that the banks have let down the public - and that this has contributed to too many people having low-paid jobs.

Part of the reason we rely too much on low paid, insecure work is that the small and medium sized firms - that could create the good, high paying jobs of the future - can’t get the finance they need.

Of course, financial services are an important industry in itself. But for an industry that calls itself a ‘service’, it has been an incredibly poor servant of the real economy. Not just since 2010 - or 2008 - but for decades in this country. We need a reckoning with our banking system, not for retribution, but for reform.

• He will explain why he is determined to break up the banks.

To really change our banking system, we have to get to the root of the decades long problem in British banking: too much power concentrated in too few hands. Britain has one of the most concentrated banking systems in the world with just four banks controlling 85% of small business lending.

If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy. In America, by law, they have a test so that no bank can get too big and dominate the market. We will follow the same principle for Britain and establish for the first time a threshold for the market share any one bank can have of personal accounts and small business lending.

• And he will stress the difference between his approach and the government's.

I want to be clear about the difference this will mean: this is not about whether we should have new banks - that is the question this government is still asking - but about how.

It is not about creating new banks that control some tiny proportion of the market. But new banks that have a substantial proportion and can compete properly with existing banks.

And we are not asking whether existing banks might have to divest themselves of significant number of branches. We are asking how we make that happen.

After decades of banking becoming more and more concentrated, Labour will turn the tide.

I want to send a message to our small and medium sized businesses: Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you: you will have a better chance of getting the support you need to grow your business, employ more people, at decent wages, making profits and helping Britain succeed.

• He will say that the cost-of-living crisis is a long-term problem facing Britain, not just a temporary problem.

Some people in Westminster still ask me: is the cost-of-living crisis really such a big deal? Isn’t it just a short-term problem? This shows they just don’t understand. The cost-of-living crisis is the single greatest challenge our country faces because not since the century before last have we seen such a sustained fall in living standards.

This cost-of-living crisis is about the pound in people’s pocket today, but it is not just about that. It reaches deeply into people’s lives, into the way our country is run, into who our country is run for ...

This government thinks it is all going to be OK because this year the forecasts say that average wages will eventually overtake prices. Let’s hope that happens. But I really warn this government: if they think a few months of better statistics will solve this crisis, they are just demonstrating again that they have absolutely no idea about the scale of the problem or the solutions required.

This cost-of-living crisis is about who gets the rewards, not just the averages: ordinary people or just those at the top? It is about the nature of work and whether it is secure or insecure. It is about the prospects for people’s kids and the quality of jobs. It is about decent homes at affordable prices. It is about a strong sense that this cost-of-living crisis has been coming for a long time.

And here is a note from the party explaining what Miliband is actually proposing.

[Miliband] will say the next Labour government will instruct the Competition and Markets Authority to report within the first six months after the election on how to implement this plan with clear rulings on the following:

How many additional branches the big banks will need to sell off and other regulatory changes needed to bolster competition

The timetable for the divestment of branches beginning within six months of the report and completed within a five year parliament

The maximum threshold for future market shares which would automatically trigger another CMA investigation if breached - and prevent any merger or acquisition taking place which exceeds that threshold.

Those judgments will be made against three key benchmarks that the changes bring about a level of competition which:

Improves the price and quantity of lending to small businesses

Improves service to all customers

Creates at least two new challenger banks with significant market shares

A Labour government will also introduce a new National Credit Register for small and medium sized business following recent Bank of England assessment of the benefits. This will improve lending to small business by allowing all banks to access comprehensive data about a firm’s credit history, and increase competition by putting challengers on a level-playing-field with the big banks.

(The Competition and Markets Authority is due to replace both the Competition Commission and the Office for Fair Trading in April.)

Chuka Umunna's interviews - Summary

As I've mentioned already, Chuka Umunna, the shadow business secretary, has been giving interviews this morning about Ed Miliband's speech. I have already quoted his concession that the announcement could lead to a short-term drop in bank share prices. Here are some other points he has been making.

• Umunna said there was a direct link between reforming the banking sector and increasing living standards.

[There are] too many low-skilled jobs and low wages at one end of our labour market but what we also, frankly, need to do is actually grow the number of middle income jobs that we’ve got, grow our middle class, and we know that it’s our small and medium-sized businesses that help power that; two thirds of private sector jobs come from them.

But we know they aren’t getting the finance they need to expand and grow and we know a major reason for that is that there’s not enough competition. We have essentially lending to almost 5m businesses concentrated in the hands of five million banks.

• Umunna said that Labour's policy had to be seen in the context of the amount the banking crisis cost Britain.

Overall, the banking crisis caused by the banks cost our country about £1.2 to £1.3 trillion in the wake of 2008/09. In that context, actually, we believe that the costs involved of the reform that we are proposing will in the longer term be in the public interest.

• He said that the CBI were wrong to think that Labour was proposing an arbitrary cap on banks' market share.

The CBI disagrees with having an arbitrary market cap and that is not what we’re seeking to impose here. What we’re saying is we’ve got one of the best competition regimes in the world, which we can always improve and we would get the Competition and Markets Authority to recommend what the market cap should be.

I think it’s not healthy for us to involve governors of the Bank of England in big political debates and I don’t want to drag him into that. He was asked a leading question by a Conservative MP who put it to him whether crude market caps on the share of a market that banks have are a good thing or not. We’re not proposing a crude or arbitrary market cap, we're proposing something that would be set by the independent Competition and Markets Authority ...

I actually had an exchange in July 2010 with Mark Carney's predecessor, Sir Mervyn King, and he made it very clear to me that it’s not a good thing for governors of the Bank of England to be involved in political matters.

• Umunna said there were challenger banks who could expand in Britain. Metro Bank and Handelsbank were two examples, he said.

Here's what John Cridland, the CBI director general, told the Today programme about Ed Miliband's plans for the banks. He said he did not support them.

I don't support Ed Miliband's plan to split up the banks. We've got too many proposals from politicians for structural change [for the banks]. Yes, let's have more competition on the high street. But a fixed number of bank branches per bank would lead to less consumer choice and service.

For some politicians giving a speech is a bit a chore, but Ed Miliband is one of those figures (like Gordon Brown, his original patron) who puts a great deal of faith in the art of politics-through-speechmaking. He believes in the transformational potential of a solid piece of oratory. And, to be fair, Miliband's big speeches have managed to shake things up, and alter (at least, to those who follow these things closely) the way he is perceived. His 2011 party conference speech (predators versus producers) suggested that he was serious about recasting capitalism. His 2012 one (One Nation Labour) marked an audacious marketing landgrab. Last autumn his call for an energy price freeze ended up dominating the political agenda for the rest of the year. And today we're getting another one.

The key elements in the speech have already received quite a lot of attention. Earlier in the week there were reports (which apparently emerged against the wishes of Labour HQ) saying that Miliband would propose taking measures to limit the size of the banks, and last night the party released a detailed five-page briefing note setting out Miliband's main announcement. Here's Patrick Wintour's summary, and here's how it starts.

Labour will set in train "a reckoning with Britain's broken banking system" to ensure at least two new banks can flourish in Britain with a minimum 12% market share by the end of the next parliament, Ed Miliband will say on Friday.

In a major speech designed to show how a break-up of the domination of the 'big five' banks will help Britain pay its way in the world, Miliband will argue that change is needed " not for retribution, but for reform".

It will be for the CMA to define the maximum market share a bank can hold. Market share can be defined by a bank's number of personal current accounts, business current accounts and business lending. Any bank that goes above the defined market share through a merger or acquisition will be ordered to cut branches, and any bank that exceeds that maximum through organic growth will be referred to the CMA.

The Labour leader will also propose the creation of a central register of business creditworthiness to ensure new banks have access to the same information about potential business clients as the big banks.

I will post more from the briefing note soon. Miliband is speaking at 11am (without notes, just to make things difficult for people like me) and it seems that we have already had the essentials of the speech. But, of course, it will be interesting to see the arguments he uses to flesh them out, and the reaction he gets.

Chuka Umunna, the shadow business secretary, has been giving interviews this morning. He conceded that Labour's announcement could lead to a short-term fall in the share price of state owned banks, but he said that the policy made sense in the long term.

I'm not denying in the short term that you may see a hit on the share price of these banks - it's probably happening as we speak now. But the reason we are doing this is so that we can grow our small businesses, which not only create in and of themselves more middle-income jobs - so we actually get people earning more - but also are very important feeders in the supply chain for our larger businesses.

If we solve that problem - because our economy is too low-wage and too low-skill - and we get more people earning more money, then we will see higher income tax receipts coming into the Exchequer, our businesses will do better because people will be spending more, so we will see higher corporation tax receipts, and therefore we will actually have a better economy.

And John Cridland, the CBI director general, has been talking too. He said he was opposed to Labour's plans. I will post more from his interview, and Umunna's, soon.